In a deferred compensation plan, what benefit is provided if the employee dies before retirement?

A deferred compensation plan is designed to provide significant financial benefits to employees, typically offering them the opportunity to defer a portion of their earnings until a later date, often retirement. In the event that the employee passes away before reaching retirement age, the plan usually stipulates specific provisions for the disbursement of benefits to their beneficiaries.

The key aspect of a deferred compensation plan is that it is structured to ensure that beneficiaries receive a death benefit in the event of the employee's death. This death benefit is typically equivalent to the amount that would have been available to the employee had they retired under regular circumstances. This provision is vital as it offers financial protection and support for the employee's loved ones, ensuring they are compensated for the loss of income that would have been earned had the employee lived to retirement age.

In regard to the other options, while they suggest various ways benefits could be dispersed, they do not align with the standard operation of typical deferred compensation plans. Notably, the death benefit is key to safeguarding the financial interests of the employee’s beneficiaries, making this the most accurate representation of benefits provided in the scenario of an employee's death prior to retirement.